White House not keen on Gruenberg

WHITE HOUSE NOT KEEN ON GRUENBERG — A person familiar with the situation told MM that the White House is not super hot on Senate Minority Leader Chuck Schumer’s recommendation that current FDIC Chair Martin Gruenberg be nominated as vice chair after the Senate confirms Jelena McWilliams for the top job, something the administration is hoping happens before the summer recess.

Gruenberg has said he plans to stay on after his tenure as chair ends. And the opposition party traditionally gets to recommend the vice chair. But this person suggested the White House does not like the idea of Gruenberg, an opponent of efforts to loosen some bank regulations, as vice chair at the FDIC.

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THE RISKS FOR TRUMP ON TRADE — There is a new trend in reporting lately and it should worry President Trump and the GOP. The genre is stories and op-eds in which Trump supporters complain about the impact of the president’s tariffs.

Here’s a new one from Mary Buchzeiger, CEO of Auburn Hills, Michigan-based Lucerne International Inc., writing in Crain’s Detroit Business: “I am a business owner, a proud Republican, and a voter who supports President Donald Trump's campaign to level U.S. trade imbalances.

“I am also angry, frustrated and a little scared, because the unintended consequences of the president's $50 billion tariffs on China would cripple my business in Auburn Hills and strip my 50 employees of their good-paying jobs. This is crazy.” Read more.

TRUMP SEEMS KEENLY AWARE OF THE RISK — You could see it in the ZTE tweet, with Trump clearly eager to cut some kind of deal with the Chinese that secures their help on North Korea and avoids a trade war.

POLITICO’s Andrew Restuccia and Doug Palmer report that Trump has also gone cold on Commerce Secretary Wilbur Ross, a China hawk and tariff enthusiast: “Ross has been largely sidelined in high-stakes trade negotiations with China in the latest signal that … Trump is losing confidence in his Commerce secretary, according to three people with knowledge of the matter.

“Ross … has steadily become a bit player, with the president regularly leaning on Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and White House trade adviser Peter Navarro. The Commerce secretary’s standing took another hit this week when the president tweeted criticism of the department’s recent decision to block the Chinese phone-maker ZTE from accessing U.S. technology …

KEY GRAF: “With Ross marginalized, Mnuchin’s influence with the president is on the rise, according to current and former administration officials. The president has warmed to the idea of reaching an agreement with China meant to avert a lengthy trade war ahead of the midterm elections, a position backed by Mnuchin and other moderates in the administration.”

KUDLOW IS ON TEAM MODERATE as well when it comes to cutting a deal with the Chinese. He told us this story last week about the recent trip to Beijing and his initial meeting with Chinese Vice Premier Liu He, who is back in Washington for more talks this week:

“So I met Mr. Liu He. … It was kinda cool, so we go into, this is sort of like their version of the Blair House, and it’s a lovely beautiful place, gardens and what not, and we all kind of file in and he’s the one man receiving committee and so they get around to me, and he’s got a smile on his face and he sticks his hand out, ‘Hello,’ and he says, ‘Oh, Mr. Kudlow. I watch your show all the time. I watch your program all the time.

“As it turns out. A lot of them did. I forget that CNBC has for years been broadcasting in China. … So that was a kind thing. He doesn’t have to say that. It turns out several of them watched. So does that mean we are going to get a great deal? No. Does that mean they were being cordial and respectful? Yes. Because we had worried about much worse.”

** A message from SIFMA: Nationally, seniors lose an estimated $2.9 billion every year in cases of financial exploitation reported by media outlets, while only an estimated 1 in 44 cases is even reported to authorities. Together, we can do more to protect senior investors. Find out how at www.sifma.org/seniors.**

TEAMING UP FOR CLARIDA — Former Fed Chair Ben Bernanke along with former Fed vice chairs Stanley Fischer and Alan Blinder and former CEA Chair Martin Feldstein sent a letter to the Senate Banking Committee head of today’s confirmation hearing for Richard Clarida to be Fed vice chair.

“Dr. Clarida is one of the nation’s leading monetary policy scholars. He has been a Professor of Economics at Columbia University for three decades and has published widely in the top economics journals. His expertise in monetary issues, together with his thoughtfulness and good judgment, will be invaluable assets to the Federal Open Market Committee and the Federal Reserve System.”

The White House is hoping for a smooth hearing for Clarida and Fed board nominee Michelle Bowman who would fill the slot reserved for someone with community banking experience.

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Colin Wilhelm on CFTC Commissioner Brian Commissioner Brian Quintenz’s comments that regulators are nearing a decision on the fate of cryptocurrencies. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or info@politicopro.com.

DRIVING THE DAY — Senate Banking Committee has a hearing at 10:00 a.m. on the Clarida on Bowman nominations … Trump attends a Senate GOP lunch on the Hill at 1:00 p.m. where the John McCain comments could come up … Retail sales at 8:30 a.m. expected to rise 0.3 percent total and 0.5 percent ex-autos

SCOOP: VOLCKER RULE CHANGE COULD AID BANKS — Bloomberg’s Jesse Hamilton and Ben Bain: “Wall Street is poised to get an important reprieve from the Volcker Rule, as U.S. agencies prepare to scrap a restrictive presumption that most short-term trades violate the post-crisis regulation, three people with knowledge of the matter said.

“In a much anticipated overhaul of Volcker, the Federal Reserve and other regulators are planning to drop an assumption written into the original rule that positions held by banks for less than 60 days are speculative -- and therefore banned, said the people. Instead, banks would have leeway to conclude that their trades comply with the rule, putting the onus on regulators to challenge such judgments, the people said.”

CHANGES AT GOLDMAN — BI’s Dakin Campbell: “After Goldman Sachs announced Monday that securities coheads Isabelle Ealet and Pablo Salame were both retiring from the firm, a subsequent memo was signed by the six executives left to run the division. It's likely a sign of what's to come.

“The exit of Salame and Ealet principally leaves Ashok Varadhan as the sole head. Yet the announcement of the change also listed five other executives who will join him in the day-to-day management of the division. The new management team sent a memo to employees Monday, showing a united front and assuring them that the existing divisional structure -- which houses equities and fixed-income sales and trading within the same division -- will be maintained.” Read more.

PUERTO RICO DEBT NEGOTIATIONS GO PUBLIC — POLITICO’s Colin Wilhelm: “Investors in Puerto Rico’s debt offered Monday to settle approximately $35 billion of the U.S. territory’s debts. Overall, investors would agree to receive about 61 percent of the $35 billion, though some investor classes would receive higher or lower amounts of what’s currently owed to them. The offer comes as court proceedings that could result in greater creditor losses continue.

“The offer was promptly rejected as ‘completely unaffordable’ by the federal oversight board charged with fixing Puerto Rico’s approximately $70 billion in bond debt. In a statement, the board, which acts as trustee for the territory in negotiations, said neither it nor Puerto Rico’s government were consulted on the offer before it became public, and that the settlement’s cost would violate the long-term recovery plan the board put in place last month.”

LIU HE BACK IN DC — POLITICO’s Adam Behsudi: “Chinese Vice Premier Liu He will be in Washington Tuesday through Saturday to continue high-level trade talks with U.S. officials, China's Foreign Ministry announced today. ‘China is willing to work with the U.S. to ensure positive and constructive outcomes from this upcoming round of trade talks,’ ministry spokesman Lu Kang said at a press conference in Beijing.

“The trip was announced a day after … Trump said he wanted to help Chinese telecommunications giant ZTE avoid potentially devastating sanctions. … ‘We highly appreciate these positive remarks on the ZTE issue, and we are currently in close communication with them on how exactly to implement it,’ Lu said. ‘As for the specific issues over which the U.S. side has voiced its concerns, our two sides also maintain close communication.’” Read more.

FIRST LOOK: BLOCKCHAIN SURVEY — Deloitte on Tuesday is releasing a survey of 1,000 executives at major corporations. From the study: “While commercial use of blockchain may still be limited, global executives with excellent-to-expert knowledge of the technology hold much more pragmatic views and look poised to make some major moves over the next year …

“According to the those surveyed, 74 percent report that their organizations see a ‘compelling business case’ for the use of blockchain; many of these companies are moving forward with the technology. About half of that number (34 percent) say their company already has some blockchain system in production”

MARKETS

STOCK INDEXES EKE OUT SMALL GAINS — AP’s Alex Veiga: “The major U.S. stock indexes eked out small gains Monday after a late-afternoon pullback weighed on small-company shares. The market had been broadly higher earlier in the day on hopes that trade tensions were easing between the U.S. and China. But much of that rally faded, leaving decliners on the New York Stock Exchange outnumbering risers. …

“The indexes got off to a strong start Monday, as investors hoped for reduced trade tensions between the U.S. and China after … Trump tweeted over the weekend that he would help Chinese telecommunications company ZTE get ‘back into business.’” Read more.

MARKET RETURNS TO CALM — WSJ’s Gunjan Banerji and Peter Santilli: “Wall Street’s fear gauge has been getting less scary by the week. The Cboe Volatility Index, or VIX, closed below its 200-day moving average last Wednesday for the first time since January and has remained there since. …

“The fear gauge has fallen in each of the past five weeks, the longest streak since a six-week stretch in the summer of 2016 … The VIX tends to fall when stocks rise. It uses options on the S&P 500 index to spit out a measure of expected stock swings over the next month. The prospect of calm in markets marks a sharp reversal from the weeks of turbulence since early February, when U.S. stocks slipped into correction territory. Despite the recent drop, investors anticipate more volatility for all sectors than they did a year ago, seeing the biggest swings in energy companies.” Read more.

COMPANIES REDUCE BOND HOLDINGS — FT’s Alexandra Scaggs: “U.S. companies’ pile of bond investments is shrinking as they prepare to radically change the way they spend their excess cash. The biggest 30 corporate stockpiles of securities shrank 10 percent, or $61bn, in the first quarter to $524bn, according to an FT analysis of public filings.

“At the same time the aggregate growth in companies’ holdings of cash and equivalents rose 17 percent, or $34bn, to $239bn, as senior executives assess new ways to deploy their capital. Until this year, U.S. companies faced a 35 percent corporate tax rate at home, but did not need to pay tax on foreign profits until those earnings were repatriated.” Read more.

SMALL CAPS NEAR RECORD HIGHS — Reuters’ Noel Randewich: “Wall Street’s modestly-sized publicly listed companies are beating out the heavyweights. The Russell 2000, which tracks U.S. small capitalization companies, on Monday slipped 0.2 percent, but earlier in the session rose to within less than two points of its previous record high of 1,615.5 points. Another small cap index, the S&P 600 .SPCY, closed at a record high on Friday, underscoring the ascent of a section of the stock market often overlooked by investors.” Read more.

DOLLAR RISES AGAINST LATIN AMERICAN CURRENCIES — WSJ’s Ira Iosebashvili and Ryan Dube: “The Argentine peso hit fresh lows against the dollar Monday, as concerns grew over $30 billion in local debt set to mature this week. The dollar was recently up around 8.7 percent against the peso at 25.07. The U.S. currency has risen around 33 percent against the peso this year. Investors will be closely watching Argentina on Tuesday, when the central bank is expected to roll over about $30 billion in short-term, peso denominated securities known as Lebacs that are set to mature.” Read more.

FLY AROUND

CRYPTO FIRM FOUNDERS INDICTED OVER FRAUD — Bloomberg’s Chris Dolmetsch: “The co-founders of a crypto-currency firm that raised money on social media with the help of celebrities were indicted Monday on charges they duped investors into committing millions of dollars in digital funds by lying about an initial coin offering.

“Sohrab Sharma, Raymond Trapani and Robert Farkas, the founders of Centra Tech Inc., were previously charged with fraud and conspiracy, and their indictment moves the case closer to a trial. Prosecutors say they lied about their product and the relationships they had with financial institutions. Among their alleged scams: falsely claiming to have a chief executive officer.” Read more.

SCOTUS SAYS STATES CAN OK SPORTS BETTING — AP’s Jessica Gresko and Wayne Parry: “The Supreme Court cleared the way Monday for states coast to coast to legalize betting on sports, breaking a longtime ban and creating a potential financial boon for states and the gambling industry. The first bets could be placed within weeks.

“Despite opposition from the major sports leagues and the Trump administration, the high court struck down a federal law that had barred betting on football, basketball, baseball and other sports in most states. States that want to take advantage of the ruling now will generally have to pass legislation to allow sports books to open. Some, including New Jersey, which brought the case to the Supreme Court, have a head start.” Read more.

“The U.S. bank on Monday said its asset-management arm is hoping to increase its ownership of China International Fund Management Co. — a mutual-fund joint venture in which JPMorgan has owned a minority stake since 2004 — to 51 percent from 49 percent currently. The bank hasn’t yet formally applied to do so.” Read more.

GOLDMAN LOSES ITS ‘QUEEN OF COMMODITIES’ — Bloomberg’s Javier Blas and Jack Farchy: “Isabelle Ealet, the departing co-head of the securities unit at Goldman Sachs Group Inc., is the last of a generation of bankers who battled for supremacy in a golden era of commodity profits for Wall Street. Goldman announced Monday that French-born Ealet, 55, will leave the bank next month as part of larger reshuffle.

“For years, Ealet was the queen of commodities on Wall Street, running a division in Goldman that regularly made more than $3 billion in net revenue annually. Although she hasn’t overseen the commodities business on a day-to-day basis since she was promoted to co-head of securities in 2012, she remained closely associated with the unit, which last year suffered its worst performance since the bank’s initial public offering two decades ago.” Read more.

** A message from SIFMA: Did you know financial decision-making skills decline as we age? Unfortunately, financial exploitation of older adults is a serious and growing issue with devastating impact.

A New York State report found that 2/3 of all financial exploitation was committed by family members. Seniors can often lose the entirety of their retirement savings, leaving them unable to maintain independence and coping with significant stress and health impacts. As our country ages - 18% of the nation’s population will be 65+ by 2030 - the scope of this problem can only grow.

It is vital that we protect senior investors from financial exploitation. SIFMA is working with industry members, academics, and state and federal policymakers to advance policies, regulations and resources which enhance senior investor protections. Learn how you can make a difference at www.sifma.org/seniors. **

About The Author : Ben White

Ben White is POLITICO Pro's chief economic correspondent and author of the “Morning Money” column covering the nexus of finance and public policy.

Prior to joining POLITICO in the fall of 2009, Mr. White served as a Wall Street reporter for the New York Times, where he shared a Society of Business Editors and Writers award for breaking news coverage of the financial crisis.

From 2005 to 2007, White was Wall Street correspondent and U.S. Banking Editor at the Financial Times.

White worked at the Washington Post for nine years before joining the FT. He served as national political researcher and research assistant to columnist David S. Broder and later as Wall Street correspondent.

White, a 1994 graduate of Kenyon College, has two sons and lives in New York City.

About The Author : Aubree Eliza Weaver

Aubree Eliza Weaver is a deputy production director for POLITICO Pro, having previously served as a senior web producer. Aubree also co-authors Morning Money, POLITICO's daily morning newsletter on Washington and Wall Street.

She graduated from Le Moyne College in her hometown of Syracuse, N.Y., where she was the editor-in-chief of the school’s newspaper, The Dolphin. As a student, she interned with Time Warner Cable’s Syracuse affiliate, YNN, as a news broadcast intern. Aubree moved to D.C. upon graduating in 2013 to work as a summer program adviser for the Institute on Political Journalism. She was a student in the program in the summer of 2011, when she first fell in love with D.C.